Real estate developers have a reason to smile as Rwanda government plans to cut home loan rates for new borrowers, sparking hope of increased property sales in the country.
In a bid to boost housing sector, the central government is mulling a new housing scheme that may cut mortgage loans on affordable housing to around 10 per cent down from the current 17 per cent.
“The intention is to be as much as possible close to 10 per cent of interest rate (on low-cost housing). This is going to significantly reduce the cost of financing. We want the fund up and running as soon as possible,” Musoni said while a meeting with real estate developers.
The tremendous reduction in cost of financing will trigger increased levels of both housing production supply as well as access to housing demand.
If this happens it is expected that the Affordable Housing Fund will reduce the cost of financing a house for both a developer and a beneficiary by a substantial amount.
Musoni added that not only will the fund provide a guarantee facility for developers, producers of locally made construction materials and any investors going into residential housing, but it will also support the targeted beneficiaries with low purchasing power who have adopted a saving culture.
The Kigali city housing market survey conducted in 2012, which is currently being updated, indicated that affordable housing takes the largest segment of the demand market with more than 54%’.
Having realized that the affordability levels were still low to trigger massive access to housing, it was found necessary for the government to make appropriate interventions, such as devising how to reduce the cost of financing on both housing demand and supply.
The survey identified four components that contribute to making the end cost of a housing unit substantially expensive and hence unaffordable to the would-be target group.
The move will cut down the cost of houses by up to 50 per cent, officials at the ministry said, which means that a house that currently goes for Rwf50 million will go down to about Rwf25 million.
Real estate developer Vincent Sekimondo said that the price of decent family homes could be well tailored to the pockets of Rwandans who earn between Rwf300, 000 and Rwf700, 000 in monthly wages and want to buy a house.
Minister Musoni said that the constraints include the high cost of land and infrastructure, taking up almost 30-40% of the housing unit selling price and also the high cost of financing for investors (supply) and beneficiaries (demand).
Today investors are borrowing at 15-16%, while beneficiaries borrow at 18-21%; plus the fact that borrowing period is also low as 10 to 15 years for beneficiaries.